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Worldwide Exchange

News/Business. Brian Shactman. Business news including in-depth analysis of worldwide trends.

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02:00:00

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U.s. 29, United States 21, Greece 20, Toyota 15, S&p 15, Europe 13, Timothy Geithner 10, Christine 8, China 7, Sap 7, Nicole 5, Ross 5, America 5, New Orleans 5, Tokyo 4, Ben Bernanke 4, Aig 4, Spain 4, Japan 4, Portugal 4,
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  CNBC    Worldwide Exchange    News/Business. Brian Shactman. Business news  
   including in-depth analysis of worldwide trends.  

    February 8, 2010
    4:00 - 6:00am EST  

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welcome to the show this monday. the headlines we're watching today here in asia japanese auto giant toyota will announce a recall of its prius as early as tuesday. a ceo departs after seven months on the job.
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timothier iy geithner says economic recovery will be slow but there's very little risk of a double dip recession. >> welcome to "worldwide exchange" for the start of the week. i'm christine tan in asia where it's 5:00 p.m. in the city in singapore. let's get a quick view of where asian markets are trading or have closed today. a negative session across the board once again. those debt concerns in europe weighing on investor sentiment denting investor confidence. down 1.05%. hang seng is lower at 0.6%. shanghai down 4.2%. over in south korea, another down session. kospi ending down 0.9%. bomba sensex trading to the
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upside and as for ftse global 300 index, pulling charts for you, there we go, i'm trying to sing and dance while the board comes up, do we have the board? it's coming i'm told. there we go. 15 points higher, 4,216. ross, i was about to sing and dance but i thought i'll save you -- >> i would like to see your whole song and dance routine. we couldn't put the board up in the next hour and that would be helpful. we could get that done. hello, christine. >> i'll keep my day job. >> we'll put it on youtube or something. we're an hour into trade here. it's a different pick towture t asian markets. it's commodities that are firmer this morning. we've seen oil prices bounce up a little bit. that's helped the oil stocks. also mining stocks having a good session this morning as well. we're bouncing off the
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three-month lows that we hit on friday. resour resources, orders, construction, firmer. i was pleased new orleans won. that's a great story, right? >> it is a great story not only for new orleans but for the entire united states. i have to tell you, mardi gras is next week so i'm thinking the partying is just going to continue until next week. that's how they do it over there in new orleans, ross. >> sounds good. >> here's what we're looking at on the markets. i don't know if there's partying going on for the dow. the dow swung almost 200 points on friday finally ending in positive territory at 10,012. on the week we're looking ahead to a light data week and light earningswise but we're hearing comments from treasury secretary timothy geithner that says a
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global recovery is in place. he says the united states is coming out of a recession stronger and more likely than other countries. in an sfwinterview with cnbc ne he says the recovery will be slow and uneven. >> we're beginning the process of healing and we have the capacity as a government to try to make sure we're reinforcing that process and we help guide this economy back to the point where we're not just growing again but we have seen growth translate into jobs and reaching the lives of all americans. >> the economic forecast is more cautious in japan. we have boj leader saying the country would hit a soft patch until summertime before returning to more sustainable growth. to talk more about a global economy, our guest host for the next hour, senior investment strategist for asia. andrew, welcome to you.
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we have debt concerns in europe. we have geithner saying a recovery is in place that will be slow and painful. problems in japan. fears of a double dip recession there. how would you use these themes? >> i like to say the economy will be lying on its side. what does it look like? look, the recovery on the g-3 are going to be very, very different. the americans are definitely off the block first. the japanese will take a while and vurps will linger in between. you could have dips on the way. i have no idea what a w save recovery is. the truth is data as we look at them point to things getting better but unfortunately they're getting better but the negatives
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are smaller. in this phase of the recovery, this is to be expected. i'm very greedy. i want to see big positives. i don't want small negatives. the fourth quarter gdp was strong because inventories were drawn down at a slower pace. that's good news but not positive. even the labor numbers over the weekend, of course, they were improving. a drop in unemployment. loss in jobs were minor. but then when they revised all of the benchmarks, we lost 8.7 million jobs in the period of -- it was some spectacular number. so i'm holding my breath. i think in fact we'll have significant headwinds on equities before there are enough signs -- >> are you one of those that would sell in this kind of market or would you use this opportunity as an opportunity to get into the market?
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>> i will spell it out. what we're telling our clients is for the next two to three months there is still enough opportunities in equities, careful choices where they're going but we do expect in fact that things will not get significantly better in the second half and therefore there will be disappointments. we're optimistic for the first half and neutral for the second half. we're seeing the second half appearing too early right now. >> andrew, this is nicole lapin in the united states, is that careful control strategy be affected by a blueprint coming out from bernanke this week on a plan for credit tightening? >> now, you know, this is the usual thing, nicole, bernanke will come out and he'll have to be careful what he says. he has been saying we'll have an exit policy but not yet. exit policy means look at my
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finger. higher interest rates. it's like saying the market correctors. was it wrong before? the exit policy is when we're going to see higher interest rates in the united states and of course the markets right now don't want to hear about that. bernanke is saying when the time is appropriate will include interest rates because the markets will want to know when is the appropriate time. can you spell out what's going to happen? the problem is guess what? we're having low unemployment so what if we have low unemployment the month after that? will that be the appropriate signal? >> there we go. andrew freris to stay with us. we'll get you some headlines making news right now. meanwhile, around the world, in the united states, the head of the world's largest bond fund says 2010 will be a year of sovereign risk.
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pimco ceo's tells dow jones that while greece is in need of outside aid, the risk of default is low. he says the u.k. is the most at risk for losing its triple-a credit rating because of debt levels rising at a fast rate. he favors bonds from germany and emerging economies versus u.s. treasuries. he also says that he'll remain range bound in the upcoming months. he believes inflation is an issue in 2011 and 2012. the s.e.c. is investigating whether goldman sachs made demands of aig that may have pushed the insurer to the brink in 2008. earlier that year goldman said it wanted aig to pay more than $2 billion it already paid to cover losses that the bank may suffer on mortgage securities. aig executives insisted that goldman inplaflated the potenti losses and the s.e.c. wants to know whether those demands distressed the mortgage mart by
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putting aig in a precarious situation by bleeding much needed cash. goldman is trading 1.3% higher, ross. >> interesting story here surrounding sap. returning to split leadership model with co-ceo's. the company made the surprise announcement late last night. christine? >> ross, we continue to monitor toyota shares giving up earlier gains to end 1% lower in tokyo trade today. 3,280 japanese yen. the company is getting ready to recall the new prius car due to a glitch in the braking system. an announcement will be made on tuesday. toyota may begun recalling lexus hybrids by the end of the month.
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both models use the same braking system as the prius. on friday toyota's president publicly apologized for ongoing safety problems and said the firm will bring in outside experts to review quality controls. watching shares in japanese beer maker kirin holdings saying that it and fellow beer maker scrapped ambitious plans to create one of the largest food and beverage makers. they failed to resolve differences over who would own and manage the future company. a plan first unveiled in july would have created a company with annual sales of $43 billion. concerns in greece continue to push low euros. we'll have more right after this.
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>> liftoff of the shuttle "endeavour."
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>> we are just watching live pictures of the space shuttle "endeavour" blasting off from cape canaveral in florida going on a 13-day trip to install the last two main pieces of the international space station. the launch was originally set for early sunday morning but low clouds descended over which violated safety rules for the flight. always an impressive sight, nicole. >> always an impressive sight and did they know to launch right when we came back from break? >> they were on our count. >> i think so. it's quieter over here in the united states back down on earth. we have a light week on economic data. we do have a lot coming out later in the week including the trade deficit retail sales consumer sentiment. fed chairman ben bernanke testifying about the house financial services committee on wednesday on the feds exit
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strategy. and other companies in the s&p 500 report earnings today. we'll hear from cvs, loews, electronic arts and hartford financial services. we have toys and games this week. >> that's what i like. toys and games suits me. as far as fixed income markets are concerned, we've seen stocks firm. up 3.14%. they will be no real data out. ten-year treasuries edging up a by the 3.6. $81 billion worth of funding out this week. 25 billion ten-year notes on wednesday. 16 billion 30-year bond auction on thursday. as far as currency markets are ku concerned, near 8 1/2 month lows. we did get down to 1.3637.
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dollar/yen up to 89.49. sterling/dollar is up. andrew freris is with us. we've been focusing on the g-7's reassurance on greece. how much has that stood up in trader's eyes or not? >> we've only seen the politicians coming out in support of the approach to greece at the g-7 meeting. all we've seen is politicians expressing some confidence that greece will be able to sort this problem out on their own. by comparison, the central bank has been very quiet and i think this suggests that maybe there is some disagreement with regards to the approach that should be taken towards greece. so i think overall the fact that
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all we see is political noise with no real plans or solutions to be put into place, that's going to leave the euro extremely vulnerable. i think the market is looking for some kind of plan to help greece out. if that doesn't happen, i think we'll continue to see the stress building within the euro zone not just within greece but at the periphery of europe overall some of the other countries with similar problems such as portugal and spain will come more fully into the spotlight as well and all of that will start to add up and put some pressure on the euro. we're bearish on the euro. we believe that euro/dollar has further to go on the downside. >> andrew freris from hong kong, any thoughts what is the next
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state for the australian dollar? has the fact that bank of australia stopped increasing interest rates affected that or are we looking yet at commodity prices? any thoughts on that? >> i think the australian dollar is going to be quite interesting. obviously it was one of the big beneficiaries of the easing program of huge amounts of liquidity which was pumped into the system over the course of the past year. and we saw equity markets, commodity markets all moving higher that helped the australian dollar. now that we see easing being unwound, china taking tightening telephones, th steps will weigh on the australian dollar as well. the fact that the rba is less hawkish that a couple months ago
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will add to the renewed downward pressure on the australian dollar. i believe the uptrend we have seen over the course of the past year is now likely to start running out of steam and australian/dollar will be more volatile and vulnerable over the course of the rest of this year. >> ian, this is nicole lapin in the united states, you say the australian/dollar is running out of steam. the dollar firmed up as euro fell last week. what's your outlook for the u.s. dollar? >> for the u.s. dollar i think the dollar is going to continue to gain support. i think as the year goes on, that support will broaden and the upward momentum will gather pace. i think overall the dollar is now in the very good position to regain some ground that is lost over the course of the past year. the fact that we're seeing globally liquidity being withdrawn not having a
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significant impact on asset markets globally, that should allow the dollar to regain some support as position unwinding takes place and we see investors moving back into the safety of the u.s. dollar. i think the u.s. dollar is in a very good position to benefit maybe from the increased volatility we're likely to see in asset markets this year. >> what is euro/dollar target? >> down to 127 by the end of the week. >> we're firmer here in europe trading a different direction than in asia. let's bring you up to speed. ftse 100 up 1%. commodities are firmer in the u.k. james hughes is market analyst. james, is it we have more risk appetite or looking at announcements deciding it's a good reason to buy? >> it could be a bit of both
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really. the numbers take us back almost 12 months or so when we weren't getting fantastic numbers but better than expected and even these extraordinary numbers are in line with expectations but still pretty bad to the downside although they are coming out saying they will pay a dividend again and that's helping the share price higher. we have to remember that on friday they lost 5% with miners under pressure again then. it's not too much of a surprise we're getting a little bit of a reaction in ftse so far today. last thursday and friday were negative. we'll get some sort of reaction at some point to the upside. we knew there would be a good number with a dividend hike of 30%. gold prices going higher. with the stimulus coming strength in the u.s. dollar is more than likely soon enough going to lead to more weakness in some of these commodities and some of the metals. again, how long that one is
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going to be able to hold onto the upside is the next question. >> banks having a better day today. >> banks doing all right today. again, we were pretty over the last couple days we have seen the big sectors really pushing things down so of course today we'll get that bit of a reaction. this is news that things are moving things around. today is one of the days where we lack a bit of data. not too much in terms of economic news. we have more risk appetite coming back into these markets today. with the week we've got, inflation report this week will be so important and of course gives more signs of why the bank of england pose ed easing. with datoday's reaction, we saw main sectors that got hit thursday and friday coming back a bit. >> james, thank you for that.
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frankfurt markets up about 1%. the story is all about this extraordinary stepping down of the ceo at sap. only seven months in the job. why is he gone? >> maybe he was not good enough. that is it basically. this is what the market is talking about that there might be a lack of trust within the company especialliy perhaps as from the board. the chairman appears he was lobbying against another turnover of his contract at the end of this year so perhaps the agreement was why not leave straight away and not announce straight away a new structure coming back to the old structure of co-leadership at sap. that's a very interesting one. the reaction in the market is slightly negative. down 0.7%. if you think about this, of course, in the long run, this is not as bad as it could be. >> well, not as bad in the sense that they realized they made a
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mistake. who is responsible for appointing him? >> i think there was a bit of a transition. it was decided that the co-leadership at sap was something that was an interim solution rather than a long-term strategy or long-term structure for the company. what you had was you had two men being co-leaders for some time and for leo to take over the company and it seems that has not worked out as good as it could have been so the difference between execution in the company and product development is something that they did in the past and they will now do also in the future perhaps that will be the right strategy going forward, ross. >> it's almost as bad as being a football manager. patricia, thank you for that. we have some gains this morning. the warning is that 2010 will be tougher but the stock reaction
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hasn't been that bad. >> because the bank issued the warning after the agreement reached before the weekend with eu regulators. they have agreed to a billion sheet by 35% over the next four years in order to comply with the eu regulation in exchange of the bailout plan. 6.4 billion euro 18 months ago. the bank will sell assets in spain, italy and other countries and as a consequence of that, the ceo says that it will hurt the profit ability of the bank. that's for bad news. on the positive side, he also indicated that fourth quarter of last year was rather positive with earnings equal to at least some of the three previous quarter which means 800 million euros and he said the bank was on track to reach its target to lower its cost by 15% by the end of next year. that was a positive announcement. that's why the stock is up 7%.
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>> in the u.k. we're interested to find out whether international targets will see an increase on the bid that's on the table? >> definitely. the french energy group wants to raise its offer for international power. it's a report from the independent on its website. the talks between the two companies ended last month because international power estimated that the offer undervalued the company. a french company wants to compete with another french one but in the u.k. so that will be the next battle will be in the u.k. >> we'll talk to you later. thanks very much. nicole? coming up on "worldwide exchange," could the u.s. ever lose its triple-a credit rating? moody signals its an option but timothy geithner says no way, not a chance. we'll discuss that after the break. let us know what you think.
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is america's top credit rating at risk? e-mail us your thoughts. cccc
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hello. here the headlines from around the globe. >> here in asia, japanese auto giant toyota will reportedly issue a recall of its new prius hybrid as early as tuesday.
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>> markets in europe make a positive start to the week. stocks going up despite concern over greek debt. >> in the united states, treasury secretary timothy geithner says there's little risk of a double dip recession but the econorecovery will be s. >> you're watching "worldwide exchange." global equities a mixed session so far. weaker in asia. positive and up in europe. ftse global 300 is currently up 11 points. commodities having one of the best sector performances along with autos today in europe. christine has the rundown in asia. >> i do indeed, ross. asian markets are mostly lower here today. nikkei up 1.05%. debt concerns in europe really weighing on investor confidence. the hang seng off 0.6%. shanghai down 0.1%. concerns about new share
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supplies and bank lending weighing on the greater china markets. you know what? check out mumbai in india? this market trading to the upside up 0.4%. australian market up 0.2%. nicole, always good to see you. >> always great to see you, christine. good morning. i'm nicole lapin in the united states where it is just after 4:30 in the market. dow up about 14 above fair value right now after the dow swung almost 200 points finally ending friday up about 10,012. s&p and nasdaq up slightly on the week. the s&p and dow had a bump. they were down slightly with the nasdaq having a bump but let's look to the week ahead. joining us is peter dixon, senior economist at commerce bank and with us is andrew fr
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freris. we have comments out from treasury secretary timothy geithner talking about a slow economic recovery talking about potential rough patches. are they just rough patches that we're about to see or is it something more serious? >> that remains to be seen. we're heading into an uncertain period. after the economy starts to recover, we gain a lot of momentum from final demand. i think the nature of the downturn we've seen this time in which the banking sector has taken such a hit and in which households in particular are deleveraging, means that this will indeed be a sluggish recovery and you certainly can't rule out that we will get some form of double dip. perhaps i wouldn't be as confident as mr. geithner about that particular issue. >> what do you make, peter, about pimco coming out saying that he favors german bonds instead of u.s. treasuries. what do you make of that? >> i think on a fundamental basis he's right. the fundamentals in germany are
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better than in the united states but think about this. if the u.s. engages in a period of fiscal tightening, which in a bid to get deficit under control and reduce debt level, that will impact the whole world and impact upon germany. you can't simply turn around and say i favor germany over the u.s. you have to say it looks a better buy right now but a few years down the road i think germany may well be in as much trouble as the united states if u.s. is in significant fiscal tightening. >> your thoughts, please, on derating of united states? how can the united states default? i have no idea if you drop from triple-a to double-a minus what it means? higher interest rates. we know that. >> you're absolutely right. the notion that you can downgrade the united states is frankly laughable because it is the nominal anchor for the world system. as you rightly point out, there's no danger for default.
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if you believe that the rating does indeed measure the probability of defaults which in the case of the united states is virtually zero, we're getting a bit carried away about this issue of derating. it's just not going to happen. >> meanwhile, petitier, after looking at the jobs report on friday, where does that leave us? >> well, i think that it probably just confirms the view that we held from sometime and many other people hold as well i suspect that the market is unlikely to stabilize until the spring of this year. yes, we had a sharp dip in unemployment rate but the measure of employment is volatile. look at the payroll numbers. they continue to contract. i think we'll see stabilization in the middle of the year. maybe the spring if we're lucky. it will take a long time for the u.s. economy to start creating a lot of jobs again primarily because the financial sector will not thereby to act as a
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backup. and that just confirms what he said at the top of this interview. it will be a slow and grinding recovery for the next 12 months. >> peter, this is christine. what about japan where we're bank lending data from japan and the governor warning about a soft patch in japan. how bad a state is the japanese economy in and what are the chances of a double dip? >> obviously the japanese economy continues to struggle under the burden of deflation, sluggish growth, intensified competition from the rest of the asian region. there's every possibility that japan will be at risk of a double dip because it faces probably even greater headwinds than a number of economies. it doesn't have a good record of delivering strong growth and even if it avoids a double dip scenario than the next year will be very sluggish indeed. looking at japan to generate returns, forget it. >> andrew, do you agree? >> completely unfortunately.
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japan in addition to whatever cyclical problems they have, they also have long-term problems and two things make for a very heavy mix. japan has a deficit bigger than that of the united states and equal to that of greece and there seems to be no problem for a very simple reason. japan is the second biggest foreign lender in the world. big foreign lenders don't go bankrupt. this is another aspect of their slightly unreal situation concerning defaults. you default only when you don't have enough money to pay external debts. that's why greece is in a peculiar situation because they can't do it in real terms. they don't default. unfortunately they can't. >> good point to make. andrew, we want you to continue to stay with us. andrew freris is our guest host. andrew dixon, thank you for your
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thoughts. we'll have a quick break. coming up next on "worldwide exchange," the u.s. treasury secretary may be rejecting the idea of a double dip but is japan talking about a soft patch in the world's second largest economy? we'll talk more about that. we'll talk more about that after the break. first, here's a quick look at how gold is trading after last week's shot. inching higher 8.20. 1072.40 an ounce.
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welcome back to "worldwide exchange." you're looking at a live shot of the hong kong harbor. it's now 5:40 in the evening in the city there. i'm told it's 20 degrees celsius. nice and cool. let's cross live to tokyo and check in on the trading day there. what do you have for us? >> hi, christine. the tokyo market extended losses from friday as exporters were hit by a stronger gain against the dollar and euro. investors sentiment was also hurt by growing concern about the european fiscal situation. the nikkei 225 stock average ended below 10,000 line for the first time in nearly two months. korean holding shares briefly fell 8.5% to hit a five-month
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low on massive volume after the beverage company said that it terminated merger talks with suntory holding to create one of the world's biggest breweries. korean's president told reporters that a disagreement over the merger ratio was not the only reason for the collapse of the deal and the two companies could not narrow their difference over how the new entity should maintain transparency as a public company. japan airline is leaning toward maintaining its long standing alliance with american airlines instead of teaming up with delta air lines. the new chairman is considered to be in favor of sticking with american and this would represent a reversal from just a few weeks ago when the japanese government was in favor of a joint venture with delta. that was the business report for today. back to you. >> thank you very much for that. still in japan, one of our top
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stories today looking at economic data. japanese bank lending lodging its biggest fall in four years. data showed that it fell in january from a year ago and an indication that companies str strugglining hesitating to buy funds. and a parliamentary committee was told that japanese economic growth would hit a soft patch until around summer before returning to a sustainable recovery path. to talk more about the japanese economy and some analysis we have from the managing director of bgd capital. looking at the bank lending data, can we write off any corporate led recovery in the country. >> for the moment, yes. the only positive signs we're seeing is exports and though stronger yen is a bit worrisome for the future.
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looking at the data governing bank loans that might also prop up issues that are governing the future earnings of japanese banks and this is also an important factor that we should keep ana on because of course we are all expecting that there will be some exercises done in the future by the bigger japanese banks and the equity is not so exciting at the moment but it may be difficult to convince investors to join shares. >> japan is going to hit a soft patch and talk of a double dip recession that could be in the cards. are you worried that that will happen or is it something unlikely at this stage? >> i think that unfortunately deflation is going to be there for 2010. this is not going to have what
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we would like to see in japan which is a domestic demand or even start up of the economy and on the other side we still have these excessives on the production side that it's unfortunately dependent a lot as we have seen in recent data on the yen level and i think we'll hear probably more talks about weaker yen in the near future. >> andrew, jump in. >> how concerned are you of the stronger yen and at the same time of deflation? i'm getting obsessed with deflation when i hear bank loans continue to shrink which matches japan with europe and the united states where bank loans are now shrinking and not expanding. putting those two things together, what can they do about it, if anything? >> if i had the recipe i would receive a job from the bank of japan. having said so, i think that the
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main concern is deflation. deflation is dragging on and it has long-term implications and we don't see an exit out of that. stronger yen markets can be talked a bit up and down and the yen is more impacting now on exports. >> they could intervene and decide one day maybe you should intervene in the currency markets. >> probably that's easier than japanese consumers that what they buy today is going to cost less than if they buy tomorrow which is exactly the opposite of what they think now. >> the high savings rate then continues, does it? in some sense that's good news for the government deficit because at least they're saving and buying jjps. >> yeah. i hope that they continued to buy jjps if i'm the government but on the other side if you
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start to see other markets reacting better than japanese markets, you have opportunity costs of jjps and not the markets if we see widespread interest rates increase in other markets. >> they continue to buy and there's talk about public financing in greece and japan could be under scrutiny if public financing balloons. >> it might be under scrutiny. i come from a country that was in the greece situation italy in the early '90s and at the end of the day history is telling us that people are not easily convinced that government like greece or government like japan can really go belly up. i think the likely story of south european countries like
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spain, italy and greece that have been in trouble have a system like the euro and i think people are confident on the bank of japan for being able to intervene when necessary. >> all right. >> i just want to ask andrew a question. andrew, we had a guest on friday that said he thought japan was the sort of the thing that might surprise investors and he was putting money there. are you? >> no, i'm afraid not in fact for a very, very simple reason and that is why there is consistent deflation, this means that monetary policies completely infectual. if they expand further it will blow up in terms of higher long-term interest rates and much steeper yield curve and with this happening the japanese yen is going to become once again a very attractive currency for carry trades and that will mean a slightly stronger dollar
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and weaker yen which in a sense may not be something which is bad for japan but it's effectively doesn't lead very well. >> do you agree? >> i'm in line with him. >> all right. we have to leave it. thank you very much for that. over to a look at the other markets we're watching in asia mostly lower today. >> you had some spots of strength like taiwan and australia but overall it was a weak trading day for most of these markets. hong kong closing at a five-week low. shanghai composite week as well. concerns about a slowdown in lending there. the largest lender saying they want to halt lending to property developers that horde land and even call back loans and so taking a hard line to guard against credit risk. we saw weakness in property stocks. kospi was down. we saw strength in techs and the autos giving toyota's problems.
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where we saw a massive sell-off was rumors that kumho would suspend shares today. a ripple effect for the banks which have exposure to many of these companies and have taken write-downs so we saw massive sell-offs in some of the banking stocks. some down 5%. the latest that we heard creditor of banks are scene on keeping current debt restructures so the court receivership is not going to happen right now and kumho says it will have 280 billion more from financials. >> creditors doing this because they're getting cooperation from the families? is that a sense they're getting? >> the family have state disposal rights and have been asked to give that over to creditors which creditors see as value because it gives them flexibility when it comes to
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restructuring. if they put pressure on and there could be court protection, it puts pressure on the family. the family offering their private wealth as collateral for these creditors to speed up the restructuring. it looks like they're putting their money where their mouth is. >> i was about to say that. nicely put. thank you very much for that. let's look at the indian markets. positive session so far. small gains from last time we checked. we're joined now for the indian business report. markets are doing well because it's your birthday? >> i wish that was the reason. it's been volatile out here because we dipped below 4,700 mark. saw sharp cuts kicking in. the recovery has been quite powerful as well. currently just about on the brink of breaking into the green. that's the state. that's near a recovery that you saw from the low point of the day. hats off to the entire banking
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industry. you have state bank of india which has seen good buying but a lot of data and economic one at that really kicking in today. you have the gdp estimate figures which the government released and advanced gdp is 7.2 versus 6.7% figure earlier. the manufacturing growth estimates have now been changed to 8.9% versus 3.2%. that definitely has brought back some bit of positive sentiment to the market. currently holding up in the green. some news coming in as well and here's the management comments coming in that they are open to selling the plan instead of shutting down the plan. that's what we're picking up from our sources. remember they will announce the fate of the plan by the second week of february so that's what we're picking up from our sources right now that management has been asking the u.k. government to provide
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financial support as well. with that, it's back to you. >> and you're only 26, i gather, right, today? >> 18. >> i'm sorry about that. happy birthday from all of us at "worldwide exchange." thank you for that. let's get a final thought from andrew. senior investment strategist. andrew has been with us for the last hour. andrew, it's not your birthday but give us some gift, some tidbits on how we can play the markets today. what would your advice be? >> we think the first quarter is still potentially to pick winners and to pick some trends and to expand very modestly and sensibly equity portfolio but we are rather concerned about what will happen in the second half of the year. for example, some of the areas we have been poking around is to look at hedge funds. ideas that are long and shorting
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the market and they try to balance out precisely this particular movement because the markets are so leaderless and sort of effectively directionless. i would thought the good news over the weekend the dow jones would have really bounded up strongly and asia would have followed and asia didn't. so it is a cautious expansion but definitely this is not the time to load up with equities but we still insist that there is some mild tail winds that will propel equities perhaps another 2 to 3 months onward. second quarter gdp numbers in the state will be very important because the first two, the third quarter and fourth quarter, the quality of the gdp was leading to a self-sustaining recovery and that worries me what will be the impact on earnings. the markets will not wait until earnings come out. >> i was just about to ask you that. impact on earnings.
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what is it going to look like and what are you expecting to see and where would you be putting some of your money? >> well, we will continue to be very defensive on a lot of the regions -- correction, on a lot of the sectors we are putting in. for example, we are still with consumer staples. consumer discretionaries. we are still substantially into the technology sector but particularly on the hardware opposed to the software. in terms of regions, we prefer euroland to united states and definitely to japan precisely because of potential valuation and unlikelihood that we'll get the kind of disappointments we're likely to get in the united states. a lot of it is relative moves opposed to saying we love these but don't like that. we say we're not particularly keen on either but this is likely the place where the returns are likely to be higher. >> andrew, this is nicole lapin
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from the united states. is what you're saying what we saw last week, more normal in the market than what we saw last year? last year obviously seeing a straight upward shoot instead of just shallow pullbacks. >> nicole, let me sort of spell it out as clearly as i can. we would all like to see markets continue to go up. for this to happen, earnings musti inbe going up and the underlying economy must continue to grow and grow strongly. grow strongly on a self-sustained basis. we'll have 5% growth but we'll widen the fiscal deficit. at the time that bank lending in all three economies, all three major economies is shrinking, it's negative. i don't feel comfortable. that's not like saying we're going to go into a another recession. the worst that could happen is we don't go particularly fast
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anywhere. that is a very unpleasant thing for investors because they have expectations that you can make money with things getting worse. you can make money when things are improving. it could be difficult when not a great deal is happening and this is my concern right now. in other words, there isn't something underlying to say we're off to the races. a good year for equities. >> all right. we're not off to the races just yet. we do appreciate your time, andrew freris. coming up on "worldwide exchange," moody's signals that america's triple-a rating could be at risk but pimco's boss says it's the u.k. that is most at risk. stay tuned for more but first we want to know what you think. is america or britain more at risk? e-mail your thoughts to worldwide@cnbc.com.
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welcome to "worldwide exchange." the headlines making news today. in the united states, treasury secretary timothy geithner says there's little risk of a double dip recession but the economic recovery will be slow. here in europe, stock and s&p's hit seven months into the
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job. >> the japanese auto giant will issue a recall of its new prius hybrid as early as tuesday. >> nice to have you here on "worldwide exchange." i'm nicole lapin. it's just after 5:00 in the morning on wall street. welcome to the start of your global trading day. markets are flat across the narrowing in the last couple minutes. the dow is up quite a bit above fair value. nasdaq futures are up slightly as well and another light week on data, ross, and earnings. everybody is looking to wall street to set the tone again. >> ahead of that wall street open at the beginning of the week, two hours into the trading day, we're bouncing off the three-month lows we hit on friday. we were up a percent earlier.
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it is basic resources firmer this morning. a spike up in commodity prices and fairly good earnings from the world's biggest goal miner. chemicals and autos are firmer. christine? >> as for currency markets, we're seeing a risk aversion and that's sending japanese end higher so this is how the picture is looking for dollar/yen. it is recovering just a bit right now. euro continues to remain under pressure against the dollar but also just recovering. continuing to watch the greece situation. ross? >> ahead of the world's biggest bond fund says this year is the year of sovereign risk. dow jones says while greece is in need of outside aid, the risk of default is low. the u.k. is the sovereign most
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at risk of losing its triple-a rating because debt levels are raising at a fast rate. the inflation will be an issue but not until next year in 2012. joining us with the rest of the show is the chief investment officer managing partner. thank you for joining us. there is a question whether at this stage like any debt but -- >> if you look at the gdp and the amount of debt in the u.k. versus gdp, it's high but the maturity profile if you look at when it's due is manageable. if you look at greece, spain, portugal, you tend to get very high amounts of debt relative to
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gdp. >> as it is with individuals and companies. >> when you lose the respect of the markets, credibility, you are less able to extend your matures which a lot of corporates have done this year. we favor corporate debt and we favor stable revenue generating companies to governments so i think you're still in looking at that investment -- >> you told me an interesting thing. you are investing in greek debt. >> let's take the premise. they cannot control money supply. ecb does that. interest rates are set at zero. what can they do? they can tax. they can go through fisccal austarity. up to 24 months we'll give it a guarantee or whatever which allows them to fund on the short end up to 24 months and it means
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that the risk, shape of the yield curve is upward sloping and normal and allows them to fund the short-term. unless they fix what is going wrong in the country, spending more money than they have, the yield curve will be steep and to borrow in five or ten years will be expensive. >> you're taking a big risk on a policy change and policy announcements. how are you hedging that risk? >> we've done a relative value trade. we've taken greece short portugal. we think that greece will begin to recover and the other way you could hedge risk is look at the basis difference between yields but underlying bet is directional. it's going to get help from the ecb or imf in the next week or two and it will be too little. they like to do small steps. and then you're going to get a second part of the explanation
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that will be money supply m-3 is what they're going to effect. >> that's interesting play on greek debt. >> they won't default. they can't let them default because spain is next, portugal is next. >> it's about risk. >> let me give you numbers. one-year debt in greece is trading at 650 basis points. more interesting, three-year debt is at 450. five-year is at 375. that's a negative sign. that means default expectation is building into the short end because you have to discount it in price so that if you default, everyone gets the same amount of money. so the inverted yield curve means they can't borrow short-term either. they are stuck in that no man zone of will they default? they will not default. ecb needs to go something this week. >> we'll look for that story. let's broaden it out.
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debt versus investing in stocks. whatever happens it seems clear that the extra special liquidity will be withdrawn. liquidity as measurable interest rates will stay in place for some time to come. >> let's look at global stock markets. on a global eps multiple kind of model, global stock markets and especially g-10 and g-7 look cheap. on a dividend model they look valued. there's growth built into those economies. my underlying premise is to look for recurring income. i'm looking for increases and growth in underlying economy and sustainability of that growth. not a volatile capital appreciation but more a series of dividend payments so bonds look good, corporate debt looks good, and brick emerging markets look very interesting this year. >> on that point we'll take a
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break. if you have any questions, e-mail them. some of the other stories we're following from around the globe, the chief executive of sap has resigned unexpectedly. he has stepped down. sap will turn to a split leadership model with co-ceo's. the company made that announcement late yesterday. and after being only seven months in the job, nicole, you would think he was managing a premiere league football team. >> you would think. meanwhile, treasury secretary timothy geithner says a global recovery is in place. speaking at the g-7 meeting in canada this weekend, he says the united states is coming out of a recession stronger and more quickly than other countries. in an interview with abc news, geithner says the risk of a double dip slump is low but the recovery will be slow and uneven. >> we are beginning the process of healing and we have the capacity as a government to try
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to make sure that we're reinforcing that process and we help guide this economy back to the point where we're not just growing again but we see growth translated into jobs and reaching the lives of americans. toyota shares giving up earlier gains to end 1% lower in tokyo today. this after we had the car maker report saying they are getting ready to recall its new preoius hybrid car because of a glitch with its braking system. both mods used the same braking system as the prius. on friday toyota's president publicly apologized for ongoing safety problems and said the firm will bring in outside
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experts to review quality controls. coming up next, the chief executive the world's biggest bond fund says 2010 will be the year of sovereign risk but as investors scramble for safety, will they forsake the traditional safe haven of u.s. treasuries? >> sap ceo has unexpectedly resigned. we'll find out how the shares are reacting in the global stock watch.
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in the u.s., a number of law firms are scrambling for a chance at the mother lode, a lawsuit against toyota. class action lawsuits have been filed against the japanese car maker and many firms have websites up and running trying to find victims of toyota's defective gas pedal or floor mat. former merrill lynch ceo john thain is the new ceo and will put together a new management team as restructuring the company's debt is his new priority. read more at cnbc.com.
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welcome back to "worldwide exchange" this monday. let's take a look at gold and oil. recovering from last week's weakness and gold trading up. as for oil, it's also the same picture up 64 cents. 71.83 a barrel. as a result up 64 cents. 70.23 a barrel. good session in the commodities. >> london markets just over two hours intoed trading session. we've been firming bouncing off three-month lows. we've pulled back a little earlier on. commodity stocks generally performing fairly well. what do you think of mining
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stocks? they are the ultimate player on risk appetite regardless of underlying fundamental. >> i saw something interesting yesterday. i was in brussels seeing one of these guys talking about his views. he said he doesn't like the hards. he likes the softs. the mining stocks are a play on the hards globally. the soft commodities are much bigger player on china and asia continuing to grow in terms of middle class population and consumption. >> we'll talk about that. we have a commodity section coming up in a few moments. big news out of germany this morning is the fact that the ceo of sap has stepped down after only being seven months in the job. patricia is following reaction to that news. are investors giving it the thumbs up or thumbs down that he's gone? >> thumbs down at the moment. i think in the long run this might not be the worst piece of news for sap analyst confirming
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buy or hold rating on that stock as far as i can see at the moment. s&p down 1.2%. very interesting right now the stocks and what is gaining and putting us a bit to the upside. up 2.2% on the back of the news of a guy joining the board and also taking over production side of mercedes. t we just had sales numbers out from vw's audi for the month of january up staggering 39% possibly picking up also business from toyota and they say they want to correct the 1 million sold cars for 2010. that's frankfurt. let's go over to paris. >> we're still higher but we're losing steam if you compare with opening this morning. the top gainer after the bank reached an agreement with the eu
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regulator on its recovery plan. shares going to the balance sheet by 35% over the next four years. that was the requirement. the ceo says this will impact the profitability of the bank. dexia saying activity in fourth quarter was good and earning on the last quarter were equal to the total of the three previous quarter. that's positive news or so the bank is on track to reach its target to cut its cost by 15% by the end of next year. that was announced over the weekend. that explained why dexia is the best performer on the french market. that's the story in paris and now over to asia. >> weakness over here in asia. fiscal issues in europe weighing on investor sentiment. nikkei sliding 1%. below the 10,000 mark at a
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two-month low. we saw a sell-off in resource linked shares and given strength in the yen putting pressure on exporters as well. and of course toyota once again in focus and nikkei report that it is considering a recall of the sedan and the lexus hybrid models which use the same brake system as the prius. that could come later this month. but also there is a report that it is considering recalling the prius as early as tomorrow. that stock like i said weak on the back of that. as for the kospi, market falling above 0.9%. we saw strength on autos on the back of toyotas problems but affiliates saw a big sell-off on concerns about the financial problems it's facing. concerns over reports that it could file for court protection but some sort of deal is being made with the family offering private wealth as collateral to the creditors and creditors
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saying these companies will remain under debt restructuring so no court receivership considered there so we should see a bounceback in those shares tomorrow. on that note, nicole, back to you. >> thank very much. still much more to come. very positive outlooks issued for commodities. will further strengthening of the u.s. dollar threat than upward momentum? we'll discuss after the break. [ male announcer ] for over 50 years, providing you with safe, reliable, high-quality vehicles has been our first priority. ♪ in recent days, our company hasn't been living up to the standards that you've come to expect from us or that we expect from ourselves. that's why 172,000 toyota and dealership employees are dedicated to making things right
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we have a fix for our recalls. we stopped production so we could focus on our customers' cars first. and technicians are making repairs. we're working around the clock to ensure we build vehicles of the highest quality... to restore your faith... in our company. for more information visit toyota.com.
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hi, may i help you? yes, i hear progressive has lots of discounts on car insurance. can i get in on that? are you a safe driver? yes. discount! do you own a home? yes. discount! are you going to buy online? yes! discount! isn't getting discounts great? yes! there's no discount for agreeing with me. yeah, i got carried away. happens to me all the time. helping you save money -- now, that's progressive. call or click today. we don't go lower than 130. big deal, persuade him. is it wise to allow a perishable item to spoil? he asked, why leave a room empty? the additional revenue easily covers operating costs. 65 dollars is better than no dollars. okay. $65 for tonight. you can't argue with a big deal.
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welcome back to "worldwide exchange." it is 5:20 on the east coast of the united states. you're looking at a live picture of the empire state building in new york city. are the markets in an empire state of mind? the market moved lower in the last couple of minutes. the dow is nine above fair value right now. the dow and s&p futures are right about fair value and nasdaq futures up slightly on the week the s&p and dow were slightly negative. the nasdaq did see a bump but it is a quieter week for economic data in the united states with key reports out wednesday, thursday and friday on trade deficit, retail sales and
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consumer sentiment. ben bernanke testifies on wednesday on the fed's exit strategy. another 60 companies in the s&p 500 will report earnings this week. today we'll hear from the likes of cvs, loews, luxury hotel operator and not home improvement retailer, video game maimer electronic arts and hartford financial. >> two trading on top of the ftse 100 today. xstrata reinforce iing dividend. profit up nearly 80% thanks to record production at randgold's. the ceo explained why gold is n
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attractive investment even at these levels. >> when people are concerned or confused about the value of paper currencies, they tend to turn to gold. >> joining us now is the senior analyst at ets securities. do you think these earnings results are sustainable given the uncertainty around demand in china? >> 2009 was a strong year for commodities coming off a low base and investors increasingly looking into 2010 to see how sustainable is this in term of what we're seeing in out flows we see more of a selective approach to commodities but still generally very positive on the longer to medium term outlook. >> where do you see pricing? how strong is pricing going to be? >> as i say, it varies across
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the commodities spectrum. where we see a lot of interest is into very sort of broad basket and etcs that we offer and a lot of interest into the more china and emerging market growth. >> one of the concerns is the reason we had a bounce back last year in metals prices in particular is we saw stockpiling from china and what's your view on that stockpiling story? do you place a lot of faith in it or not? indication is if it was stockpiling there won't be more demand this year. >> it's one to consider particularly for the industrial metals picture. we saw a very large buildup in stockpiles coming through. i guess the longer term story in terms of what we see in inflows with precious metals in particular is a lot of interest in the more longer term story particularly the structural
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demand. >> what do you make of precious metals? gold is a fantastic investment. >> precious metals to me are inflation hedges. we've had several different people say the view on inflation is 11, back end of 11, beginning of 12. i still think as i was saying before china is trying to slow its growth down. they have come out and tightened money. the other brick economy are india and russia. so without that structural growth of infrastructure in china, managing that down a bit, you want to be in the soft. you want to play middle class emerge consuming more global demand. please, daniel, what do you think? >> what we see in terms of inflows is the most that we have seen across 2009 was into the very broad basket agriculture commodities. they do provide a very nice much more longer term story and quite
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a stark contrast as you said before that the inventory picture regards to agriculture commodities we didn't see that same buildup post the credit crisis and it's more of a structural longer term story. >> that's the sector with everything else going on, it's totally driven by its own fundamentals. >> you want to consume more and eat copiously and the third thing people forget is there's a replacement for energy. in other words, as oil price goes up, you get corn demand taken out by the people that are producing ethanol so you have a surplus for example. >> in the united states this is nicole lapin. i'm curious, u.s. stock market fairly valued or not? >> it depends what model you use. if you use an earnings model, no.
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it looks like it could have 10% to 20% higher. i was at an interesting presentation by the big banks and they use a dividend model and based on a dividend model which looks on what you're getting out of the market without getting inting capital appreciation, you want to look for markets where there's an increase where dividends will increase or be steady and where gdp growth is underlying. i don't count on the growth story. based on that u.s. markets are fairly valued. asian markets looking undervalued and emerging economy generally bricks is where you should put your stock dollars. >> all right. stay with us. we do want to thank you, daniel willis. and do stay with us. much more to come on "worldwide exchange." u.s. treasury secretary timothy geithner thinks the u.s. isn't in danger of losining its aaa credit rating. we want to know what you think.
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e-mail us at worldwideexchanch e worldwideexchange@cnbc.com.
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welcome to "worldwide exchange." the headlines today, in the united states, treasury secretary timothy geithner says there's little risk of a double dip recession but the economic recovery will be slow. in europe, stock markets make positive start to the week despite ongoing worries about greece's debt. >> we continue to watch toyota here in asia. the japanese auto giant will reportedly issue a recall of the new prius hybrid as early as tuesday. >> nice to have you with us here on "worldwide exchange." here is where the markets are hovering at this hour. moving lower this just the last couple of minutes. the dow is about five above fair value and take a look at the screen above what you're looking at right now. the s&p futures are right about fair value. nasdaq futures are up slightly
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and on the week s&p and dow were slightly negative. the nasdaq did have a little bump. >> yeah. european stock markets bounced off the three-month lows we hit on friday. remember, we closed really before we saw where the u.s. stock markets closed. a bounce back today. commodity stocks doing well. banks firmer. defensive ends of the market like food and beverage are also up. what's happening with the euro today against the dollar? we're still looking, they're trying to be reassuring with the g-7 finance ministers over the weekend. >> they were giving some assurances. we are seeing a bit of a recovery as far as euro/dollar is concerned. still some concerns about the euro zone when it comes to debt. that's still weighing on sentiment not going away just yet. dollar/yen also recovering against the yen. that was up firmly earlier today pushing up exporters. dollar making a slight recovery.
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89.47. sterli sterling/dollar stnds at 0.8797. timothy geithner says the u.s. is not in danger of loosing its aaa rating. >> that will never happen to this country. again, if you step back and look at what's happened through this crisis when people were most worried about the stability of the world, they still found safety in treasuries and dollar. you still see that every time people are reminded about the many challenges you see around the world. >> joining us live to talk about that right now, michael is not yet with us. he should be back with us in just a second. louis, let's get your reaction to the sound we just heard from timothy geithner. >> if you look at the moody's statement he's talking about, they say they may lose aaa
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rating over the next 5 to 8 years if the current fiscal situation continues. now, if there's gdp growth between 1% and 2%, the estimates are that you have your deficit over the four or five-year period. there's a 1% to 2% increase. would you expect the deficit to be significantly lower in the near future. they're smart guys. they know what's going on. moody's is giving you a warning signal that if things continue it will lose aaa. >> we're looking ahead to fed chairman ben bernanke perhaps laying out a blueprint on wednesday. what can we expect from that coming out this week? >> i think the view that i'm going to take on the u.s. coming and discussing current situation is there will be moderate growth. there's not going to be a double dip. inflation is well in control. and that unemployment is key to the economic recovery. i would say that the twin pillars of inflation are price
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inflation and wage inflation and in order for wage inflation to actually take place, you need to have people fully employed saying i want to get paid more or i move over there. until that happens, inflation is not a problem. if you have a slow but steady recovery, that's probably the best situation you could talk about. >> does it matter -- does it matter if that slow recovery doesn't create jobs? >> well, okay, slow recovery doesn't create jobs. let's say you're the president. what would you do? i would begin to employ a lot of people in the public sector. i would begin infrastructure projects. i would get a health care plan that covers people. governments have ways of pulling in employment. >> spend more money and increase the deficit. >> if you grow gdp, it erases the deficit quickly and it's counterintuitive but you spend money to get rid of the deficit and get full employment. as soon as you get full employment, your gdp growth will erase your deficit.
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>> we do have michael with us. michael, on thursday we saw what looked like we were moving toward a correction sooner than people thought. then we saw a turnaround on friday. are we still headed for a correction and if so, when? >> i think the market over the next year or so will remain choppy. i think over the course of the year we'll see a trending upwards as the recovery continues to take root. but it will be in fits and starts. we'll be subject to minus 5, minus 10% at any point in time. we suggest that clients continue to maintain or increase their equity exposure over the course of the year and average in over the course of the year. >> of course stocks were down 7% from their january high. not a technical correction but some say it still feels that way. would you agree?
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>> it's our sense that the main element that the investors are looking for is to see economic growth. and we believe that economic growth continues to be hampered by lack of capital availability to small and mid size businesses basically businesses with under 400 to 500 employees. one of the things we're suggesting to our own clients is that they play this lack of capital availability trend by buying into certain u.s. finance companies where they can basically take on what used to be bank type risk but earn low teens kind of returns which we view as an outstanding risk return relationship in the marketplace. that's one way to play the lack of credit availability which will drive muted economic growth in the economy. >> michael, this is christine in asia. when you say you recommend
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clients to increase equity exposure to, which sectors would you increase exposure to? >> we would look at the lower risk sectors. for example, some of the companies we like are 3m, coke, these are global companies participating in global growth because we're buyers into the global growth story that's unfolding but on the other hand, we need some very well financed businesses that will take advantage of some well timed merger activity that will be happening across north america and in some of the developing market. >> what do you make of that? >> i agree in principle with what the gentleman was just saying with one exception. if you look at russell 2,000 versus s&p versus dow, you'll find that the banks not lending to medium and smaller companies has led to smaller companies underperforming the bigger ones. rather than reaching for higher beta in this environment, i
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would suggest like you do and certain of your picks that you reach for luxury goods. you reach for consumer cyclicals and you reach for cars. you reach for energy. you reach for the sectors of the economy that are going to benefit from mild gdp growth and have lending and have the wind in their sails. i hate to use that analogy but those are sectors that most banks recommend. if you look globally, i would look at those sectors in the emerging and brick economies in terms of allocation to equities markets. >> i'm not sure that my first set of picks was properly characterized. these finance companies are making what used to be bank debt, term debt, into small and mid sized companies and they're getting paid low teens to do that and my guess is by mid 11, that opportunity won't exist and banks will begin to make those
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kinds of loans again. these are loans just beyond working capital type risk so these companies are dividend yielding from 8% to 10%. i'm not viewing that as a high beta bet. it's basically getting into financing. medium sized businesses for the most part are not public. i'm not sure the russell 2,000 would be an appropriate comparison. this is really let's lend to mid sized america the way banks used to lend in their most prudent times. >> i do want to dig more into bank financing in just a little bit. michael, do stay with us. the c.i.o. louis, we appreciate you staying with us. both of you, much more to come. the new orleans saints have won the biggest trophy in u.s. sports. we'll bring you the super bowl details coming up. plus, what does golden girl betty white have to do with american football? find out after the break.
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cit hired john thain as the new chief exec. he replaces peter who will remain on the board. thain was hired for his experience turning around the ncis. congratulations to the saints for winning the super bowl. the saints were led by quarterback drew brees and came back from behind in the fourth quarter. the final score 31-17. it was the first super bowl title for the saints in their 42-year history and four years after the city was devastated by hurricane katrina. saints fans celebrated the victory by pouring into the
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streets. look at this in the french quarter in new orleans. probably staying out into the wee hours of the morning. not anything new of course for the city of new orleans. the super bowl is pretty much about the game itself, right? people are also watching very closely for the commercials that cost an estimated $3 million for a 30-second spot this year. take a look at this ad. it's a snicker's ad voted as highest by fans. >> come on. >> what is your deal, man? >> you've been riding me all day. >> you have been playing like betty white out there. >> that's not what your girlfriend says. >> eat a snickers. better? >> better. >> i'm open. >> that hurt. >> you're not you when you're
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hungry. snickers satisfies. >> is that why you eat candy during the break? >> so i can be big and strong in a super bowl ad. something like that. i was really pleased new orleans won. we were tipping them on friday. >> i know you were. >> it's a great story. they will probably make a movie about that as well. let's move on from snickers and super bowl to sap because the chief executive has suddenly resigned. he's stepped down. sap is returning to a split leadership model with co-ceos. the company made that announcement late last night. the stock down 1.4%. this is the thing, he had only been in the job seven months and he's gone. >> seven months in the corporate world some say is a long time. japan airlines is reportedly leaning toward american and leaving delta at the alter.
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according to a newspaper, jal will keep its partnership with american airlines. jal will make an official announcement this week. the embattled carrier was leaning toward joining with delta. a new ceo thinks that switching alliances is too risky and could hinder jal's turn around process. ross? >> final thought from louis gargour. what's the best play to play the bricks? >> buy an etf in the country and bricks. buy something that looks at specific themes. some of the themes i like are dividend plays in the bricks, commodity plays in the bricks. stocks that reflect those views or as part of a balanced portfolio look at having exposure to the bricks.
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>> what do you fear most in the next year that you're hedging against? >> we're beginning to do much more relative trades. the portfolio went from directional to relative value and we fear not a fat tail. we fear risk. individual companies having problems, having bankruptcy relative to the market or with a buoyant market. we are identifying the companies that have not refinanced and have problems coming up. we're pairing those against companies that have done the right things. >> thanks for joining us. all right. just under 12 minutes to go until "squawk box." what's find out what's coming up. >> good morning, everybody. we're going to put the markets and the economy to the test today. our guest host is former federal reserve board governor randy
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crosner and we have liz ann saunders and howard ward portfolio manager for a growth fund. we'll explore the businesses of happiness. the vice chairman of aol and majority owner of washington capitals is out with a new book. he'll be our special guest today talking about that business of happiness and all of that on monday morning quarterbacking on the super bowl ads from snickers to budweiser and everything in between find out which ones are creating the most buzz after the big game and which ones were the big flops. plus, you have to stick around. i have a couple of very special guest co-hosts today. i'm not going to tell you who. this is your tease. come back in ten minutes and i'll tell you who. >> that's mean. that's just mean that is. >> stick around. ten more minutes. they're right here but i'm not going to let them talk just yet or let you see.
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>> all right. we're sticking around. we got it. thanks, becky. >> sounds good. thanks. i'm trying to peek over there. that's what you call a tease. will the u.s. stock markets continued to be rattled by worries about the european sovereign debt news? we'll look at the day ahead on trading right out of the break. 
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it's a quieter week for u.s. economic data. key reports out on wednesday, thursday and friday on trade deficits, retail sales and consumer sentiment. ben bernanke testifies before the house financial services committee on wednesday on the fed's exit strategy. another 60 companies in the s&p 500 report earnings this week and today we'll hear from the likes of cvs, loews, luxury hotel company and electric onk arts and hartford financial services. let's bring michael back in. right before the break, michael, you talked about banks not financing to small and mid sized
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businesses but there was a recent fed report that says companies are reluctant to borrow. is this chicken and egg situation? >> i would say definitely not. we have extensive portfolio holdings and even when banks do lend the formulas against working capital, formulas against any kind of fixed capital expenditure type investments are significantly more conservative so it's not a chicken and egg because i'm quite confident that if banks return to what we consider normalized types of lending formulas, you would see significant employment growth in the mid market and below sector. banks are saying sure, at these ridiculous loan formulas, you double price of anything and you get less demand. that's what they're seeing. >> michael, bernanke is slated
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to testify before the house financial services committee on wednesday about the fed's exit strategy. what do you expect to hear from him? >> i expect to hear lots of circular wording that basically says we'll get out slowly over time when we see the markets are ready for us to do that. realistically, they've been slowly removing themselves from the marketplace. i would continue to take him at his word on that. given the fragility of the economy in europe and the u.s., i don't see drastic moves coming out of that. my main concern is the hearing turns into another show for washington beating on the fed, beating on business, and perhaps putting out more uncertainty into the business community and that's what's driving uncertainty in hiring and employing people in the u.s. economy. >> in talking about that fragility more, the s&p suffered the worst day on thursday as you
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know since april. do you think we'll flirt back or correct back with some of the march lows we saw? >> i don't think we're going back to march lows. the market anticipated good earnings over the course of the earning season and it will get them and then it will have to look ahead in terms of what it expects to see over the course of the next year and our earnings and revenue will continue to trend up but there's another phenomenon going on. a number of competitors to certain of our companies and other companies that we look at closely have gone out of business or are injured so certain companies experience significant global market share gains which is some of what's driving an increase revenue and increase profits. >> all right. michael, we appreciate your insight. let's take a quick look at u.s. futures right now. the dow is about 26 above fair value. the s&p futures are right about fair value right now and nasdaq
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futures are up slightly. this is after a week where we saw the s&p and dow slightly negative. that's it for today's show. >> thank for your company here on "worldwide exchange."
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